The CEO asked you to take charge of the following projects for the company. However, he told you that because of the limited funds available, you have to pursue the projects one at a time. Using the profitability index, decide on which of the projects you are going to accomplish first, second, and third. Project 1 requires an initial investment of P500,000, will provide future cash inflow of P1,300,000, and present value of the future cash inflow of P850,000. Project 2 requires an initial investment of P1,000,000, will provide future cash flow of P3,000,000, and present value of the future cash flow is P1,550,000 Project 3 requires an initial investment of P1,500,000, will provide future cash flow of P5,000,000 and the present value of the future cash flow is P2,835,000.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The CEO asked you to take charge of the following projects for the company. However, he told you that because of the limited funds available, you have to pursue the
projects one at a time. Using the profitability index, decide on which of the projects you are going to accomplish first, second, and third.
Project 1 requires an initial investment of P500,000, will provide future cash inflow of P1,300,000, and present value of the future cash inflow of P850,000.
Project 2 requires an initial investment of P1,000,000, will provide future cash flow of P3,000,000, and present value of the future cash flow is P1,550,000
Project 3 requires an initial investment of P1,500,000, will provide future cash flow of P5,000,000 and the present value of the future cash flow is P2,835,000.
Transcribed Image Text:The CEO asked you to take charge of the following projects for the company. However, he told you that because of the limited funds available, you have to pursue the projects one at a time. Using the profitability index, decide on which of the projects you are going to accomplish first, second, and third. Project 1 requires an initial investment of P500,000, will provide future cash inflow of P1,300,000, and present value of the future cash inflow of P850,000. Project 2 requires an initial investment of P1,000,000, will provide future cash flow of P3,000,000, and present value of the future cash flow is P1,550,000 Project 3 requires an initial investment of P1,500,000, will provide future cash flow of P5,000,000 and the present value of the future cash flow is P2,835,000.
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